Turkey has introduced secondary legislation outlining details of major legislative changes to the pledge and assignment regime for commercial transactions. The updated legislative regime will facilitate access to finance for SMEs and boosts competitiveness (more). The latest announcements include detailed procedures and principles for applying movable pledges, establishing a central registry of moveable pledges, valuing movables subject to pledges, as well as structuring and executing pledge agreements.

The Law on Pledge on Movables in Commercial Transactions numbered 6750 was published in Official Gazette number 29871 on 28 October 2016, entering into effect on 1 January 2017. Subsequently, a range of secondary legislation was published in Official Gazette number 29935 (bis) on 31 December 2016, entering into effect on 1 January 2017:

– Regulation on Pledged Movables Registry (“Registry Regulation”).

– Regulation on Establishing Pledge Right in Commercial Transactions and Execution Upon Default (“Application Regulation”).

Establishing the movables pledge registry is intended to ensure records are complete and correct, as well as provide legal security to parties along with and provide public access to the records.

The Registry Regulation introduces principles and procedures for:

– Establishing and operating a movables pledge registry

– Duties and authorities of registry service units and access to these registry services

– Sharing data recorded in the registry

– Fees for registry services.

The System of Movable Pledges Registry will process requests to amend or erase pledge agreements, as well as transfer rights arising from pledges and changes to the degree of pledges.

Records will be publicly accessible. Any third party who can prove their relevance will be able to make queries in the registry. Queries will be made either through registries or electronically.

Establishing Pledge Rights in Commercial Transactions and Execution Upon Default

The Application Regulation outlines issues pertaining to the pledge agreement itself, establishing pledge agreements, pledge systems, registering pledge agreements, as well as the rights and obligations of the pledgee and pledger on default.

A statement in the pledge agreement of the parties’ explicit intention to establish a pledge over the moveable will be sufficient to establish the pledge. This represents an important change in practice for movable pledges. Previously, establishing the pledge required delivery of the pledged movable’s possession to the pledgee.

Persons who can be pledgees under the Law are limited to credit institutions, tradesmen and craftsmen. Whereas, pledgors can only be tradesmen, craftsmen, farmers, producer organisations and self-employed persons.

– In writing (signing before the registry officer or a notary public).

– Once signed, the pledge agreement will then be registered in the movables pledge registry.

– It is possible to establish a pledge over receivables that arise out of a specific agreement. However, agreements requiring pledge of all future receivables without any limitations will be deemed invalid.

– Detailed rules for applying the pledge degree system, which allows movable pledges to be ranked. Accordingly, it is possible to establish pledges with either:

– Progressive ranking (allowing advancement to a higher degree, if there is an empty degree); or

– Fixed ranking.

– To fulfil the debts secured by the pledge on default, pledgees can now request transfer of ownership of the pledge movable. The pledgee can now apply to execution offices to initiate an enforcement procedure, demanding ownership transfer. This right constitutes an exception to the lex commissoria principle for pledges under Turkish law.

Valuing Movables in Commercial Transactions

The Valuation Regulation outlines procedures and principles for valuing movables which are subject to pledge, assigning valuation experts, as well as fees for expert services.

Movables subject to pledge can valued either:

– Independently by the parties, upon mutual agreement before establishing the pledge; or

– By applying to the courts to determine the value.

If the parties request a court valuation, experts will be appointed in accordance with the Regulation on Authorization and Activities of the Entities Providing Valuation Services to Banks.

Fees for valuation services will be determined and announced by Ministry of Customs and Trade. If parties apply to the courts for valuation, court expenses and valuation service fees will be paid equally by both parties.

Please see the links below for the full text of the secondary legislation (only available in Turkish).

Turkey’s Capital Markets Board has expanded the scope of permitted activity for portfolio management companies. With the changes, these companies can now be established to manage both venture capital, as well as real property investment funds. Previously, they were restricted to performing one activity, or the other.

The Communiqué Amending the Communiqué on Portfolio Management Companies and Activities of Such Companies (“Amendment Communique”) was published in Official Gazette number 29951 on 17 January 2017, entering into effect on the same date.

The Amendment Communiqué also regulates required qualifications for employees of portfolio management companies which manage both venture capital and real property investment funds. Accordingly, the company must:

– Meet the employee qualification conditions and the organizational structure required for both venture capital and real property investment funds.

– Employ a general manager with a Level 3 Capital Markets Activities License, or at least five years of experience in real estate investments (excluding sale and purchase experience), or venture capital investments.

Please see this link for full text of the Amendment Communiqué (only available in Turkish).

Read More

Turkey Updates Rules for Real Estate Investment Companies

Turkey’s Capital Markets Board (“Board”) has amended provisions governing the investments and activities of real estate investment companies (“Companies”). Notably, real estate investment companies can now pledge, lien or otherwise encumber their own assets, as well as provide securities, guarantees and indemnities, in favour of affiliates in order to finance real estate investments within the portfolios of 100% owned affiliates.

The Communiqué Amending the Communiqué on the Principals of Real Estate Investment Companies (“Amendment Communique”) was published in Official Gazette number 29951 on 17 January 2017, entering into effect on the same date.

Significant amendments under the Amendment Communique include:

– Companies can now pledge, lien or otherwise encumber their own assets, as well as provide securities, guarantees and indemnities, in favour of affiliates in order to finance real estate investments within the portfolios of 100% owned affiliates.

– Companies which exclusively manage funds for infrastructure investments and services will now be subject to the security, guarantee, pledge and indemnity provisions of the Corporate Governance Communique.

– The exemption from auditing interim financial reports and sending these to the Board has now been repealed for share sales to qualified investors.

– Real person representatives for legal entity board members must have obtained a four year higher education degree.

– For Companies exclusively managing portfolios of infrastructure investments and services, restrictions on distribution of cash dividends prior to public offering or sale to qualified investors will not apply until 31 December 2017.

Please see this link for full text of the Amendment Communiqué (only available in Turkish).

In Turkey, electricity consumers are only entitled to choose their electricity suppliers if their energy consumption at the location exceeds a certain threshold (“Eligible Consumers”; more). The Energy Market Regulatory Authority has made changes to the processes for Eligible Consumers to change suppliers, as well as increased the scope of information stored in the central Eligible Consumer database.

The Regulation Amending the Electricity Market Stabilization and Reconciliation Regulation (“Amendment Regulation”), was published in Official Gazette number 29948 on 14 January 2017, entering into effect on 1 February 2017.

New Implications for Suppliers

If a consumer begins to consume energy at a consumption point which is not been previously used, the relevant electricity supplier is now required to enter information into the Market Management System (“System”) and declare that an Energy Purchase and Sale Notification Form has been signed with the Eligible Consumer.

The information must first be entered into the system by the relevant distribution license holder. Once completed, the electricity supplier’s request for the consumer must be notified via the System. The Eligible Consumer will then be added to the relevant supplier’s portfolio.

Eligible Consumer Database

A central database of Eligible Consumers exists within the Market Management System.

The information which electricity suppliers must keep and add to the database has expanded to now be:

– Turkish identity number (or foreign identity number) for real

– Tax identification number and authorized persons for legal entities, as well as their name, surname, and Turkish identity number (or foreign identity number)

Suppliers are responsible for the accuracy of this data and the market operator (EPİAS) can cooperate with state institutions and organizations to confirm data accuracy.

Eligible Consumers can now access the Eligible Consumer portal through a method which will be determined by the market operator. Certain information will also be available at the e-Government portal (e-Devlet Kapısı), the government’s official website.

Please see this link for the full text of the Amendment Regulation (only available in Turkish).

Turkey’s Energy Market Regulatory Board (“Board”) has announced procedures and principles for natural gas connection and service fees, as well as maximum connection rates and service fees for 2017.

Decisions numbered 6807 and 6810 were issued on 26 December 2016 and published in Official Gazette numbered 29940 on 6 January 2017, which will apply from 1 January 2017 onwards, entering into force on the publication date.

Distribution companies must apply the subscriber connection fee determined by the Board. The connection line for eligible consumers can be made by the distribution company or certificate holders, depending on the eligible consumer’s choice. The connection fee will be freely determined among the parties involved.

Distribution companies can receive a security deposit (determined by the Board) to secure their receivables. It can be collected in cash or by instalments.

Eligible consumers can now submit a guarantee letter as the security deposit, instead of cash. Those who have already given a security deposit in can replace it by the guarantee letter, if they wish. Security deposits will be refunded upon request, if the necessary conditions are fulfilled within 15 days of the request.

For buildings reconstructed after demolition, the residence’s existing connection and gas usage contracts will now be terminated. Any previously collected security deposits will be refunded. The existing right holders (whose gas usage contracts have been terminated due to demolition) will not be charged for a connection fee if they sign a new connection contract requesting natural gas be supplied to the new building.

If a natural gas meter malfunctions or is suspected to be inaccurate, the customer can ask the distribution company to examine the meter. If the customer is found to be right at the end of the examination, the distribution company will bear the costs of the examination.

Legal entities which received natural gas distribution licenses via a tender by the Energy Market Regulatory Authority must not exceed the price ceiling for connection fees, specified in the tender.

Please see this link for the full text of the Decision number 6807 and this link for the full text of Decision number 6810 (links are only available in Turkish).

Turkey’s Energy Market Regulatory Board (“Board”) has amended certain requirements for the Petroleum Pipeline Corporation’s (BOTAS) operation of the national natural gas transmission pipeline network. Changes apply to time limits for End of Day Trade, notifications regarding capacity transfers or changes of supplier, as well as arrangements for Standard Charter Agreements if a supplier or exporter’s licence is revoked.

Board decision Number 6646 (“Decision”) was published in the Official Gazette on 7 December 2016, entering into effect on 1 January 2017.

Significant amendments introduced by the Decision include:

– BOTAS will now publish the Gas Usage Limits which includes the minimum daily natural gas amount projected to be absorbed in the Main Exit Point and Secondary Exit Point.

– If a supplier or exporter’s (“Charterer”) licence is revoked, any Standard Charter Agreement with BOTAS will now be terminated, provided there are no more liabilities outstanding under the agreement. The Performance Guarantee Letter will be returned to the Charterer.

– Investment costs to connect the distribution system to the transmission network will be paid either by BOTAS, or jointly by the relevant Distributor Company and BOTAS.

– Time limits now apply to notify BOTAS for capacity transfers or changes of supplier:

– Notification must be made by the 20th of the month before the month the transfer or change of supplier is scheduled.

– For capacity transfers, BOTAS must respond by the 25th of the month before the month the transfer is scheduled. BOTAS must respond to transfer requests within three days of the application date.

– For the day before the last day of the month, Charterers can conduct End of Day Trade until 12:00 of the 5th day after such day. For the final day of the month, Charterers can conduct End of Day Trade until 12:00 of the 4th day following such day. Charterers must notify BOTAS about the agreed amounts.

Please see this link for the full text of the Decision (only available in Turkish).

Read More

LPG License Amendment Fees No Longer Apply in Turkey for Changes to Lots, Sections and Parcels

LPG license amendment fees will no longer apply in Turkey for address changes to lots, sections and parcels. Address changes due to the authorized administration changing the name of the street, boulevard etc. were already exempt from the license amendment fee. However, the exemption is now widened to also apply to changes by the authorized administration to lots, sections and parcels, as well as consequential changes to business licenses.

The Board Decision Amending the Board Decision on Information and Documentation Required For License Amendment and Time Extension Applications Regarding Liquefied Petroleum Gases Market (“Decision”) was published in Official Gazette number 29952, on 18 January 2017. Please see this link for the full text of the Decision (only available in Turkish).

Read More

Turkey Raises Threshold for Banks to Provide Loans Without Statements of Account

From 1 January 2017, banks in Turkey are not required to obtain statements of accounts for loans up to one million Turkish Lira. Previously, the threshold was set at 250,000 Turkish Lira. The banking regulator has also announced extensions for amendments to Financial Reporting Standards which apply to banks.

The Banking Regulatory and Supervisory Agency published the Regulation Amending the Regulation Regarding Bank Loan Transactions (“Amendment Regulation”) in Official Gazette number 29918 on 14 December 2016, entering into force on the same date.

The Regulation Amending the Regulation on the Procedures and Principles for Classifying Loans and Considerations to be Paid for These Loans (“Loan Classification Amendment Regulation”) was published in Official Gazette number 29918 on 14 December 2016, entering into force on 1 January 2017.

– Banks which have not updated their bank loan statuses for TFRS 9 by 1 January 2018 can be provided additional time to become compliant, if they provide detailed justification.

– Provisional Article 2 of the Regulation on Loan Classification is abolished.

– The enforcement date for the Regulation on Loan Classification is postponed from 1 January 2017 to now be 1 January 2018.

Please see this link for the full text of the Amendment Regulation and this link for the full text of the Loan Classification Amendment Regulation (both only available in Turkish).

Read More

Turkey Amends Principles for Health-related R&D Tenders

Turkey has amended principles for health-related R&D tenders. The changes apply to procurement of R&D services by the Ministry of Health, within the scope of Article 3(f) of Public Tender Act number 4734.

The Principles Regarding Amendments to the Principles Regarding Tenders to be Made Within the Scope of Article 3(f) of Public Tender Law number 4734 by the Ministry of Health (“Amendment Principles“), was published in Official Gazette number 29946 on January 12, 2017, entering into force on the same date.

The amendments do not apply to service procurements for R&D projects which are:

– Conducted and supported by national R&D institutions related to the Ministry of Health

– Conducted by central or provincial organizations, as well as affiliated associations of the Ministry of Health, which are made at their own cost and the results will be used exclusively for their own activities.

The amendments include:

– The definition of “service provider” in the Amendment Principles has been extended to now also include joint ventures established by natural or legal persons, bidding for the sale and purchase of R&D services.

– Emphasis that negotiated tendering procedures will not apply for purchases made via the direct procurement method.

– For national R&D procurements by special budgeted institutions within the Ministry to conduct national R&D activities:

– The relevant board of directors will set the monetary limits, within certain limits.

– The relevant board of directors can abolish the obligation to take security for such procurements, depending on the tender’s performance type, duration, payment method, and whether the service provider carries foreign characteristics.

– National R&D activities can be undertaken via the direct supply procurement method for services provided by universities abroad, hospitals and education institutions affiliated to the universities, as well as studies and research centers.

– Contracts prepared by the related administration can be used if the Public Procurement Authority’s standard contracts cannot be used.

Please see this link for full text of this Amendment Principles (only available in Turkish).

Read More

Turkey’s Tobacco and Alcohol Regulator Increases Compliance and Service Fees 3.83% for 2017

Turkey’s Tobacco and Alcohol Market Regulatory Board has increased compliance and service fees by 3.83% for 2017. Increases apply to compliance and service fees for Certificates of Compliance for building new facilities, as well as Project Alterations for the trade and production of tobacco products.

Decision number 12382 was published in Official Gazette number 29926 on 22 December 2016, in line with Article 23 of the Regulation on Production and Trade of the Tobacco Products. Please see the link for the full text of the Decision (only available in Turkish).

Read More

Turkey’s Central Bank Updates Rediscount and Advance Interest Rates

Turkey’s Central Bank has updated discount interest rates for commercial papers with expiry periods of three months or more. The revised rates are 8.75% for rediscount transactions and 9.75% for advance transactions.

The interest rates were announced in Communiqué of the Central Bank of the Turkish Republic, published in Official Gazette number 29935 on 31 December 2016, entering into effect on the same date.

Please see this link for the full text of the Communiqué (only available in Turkish).

Read More

Turkey Updates Trademark Classification System for Goods and Services in Line With WIPO Standards

Turkey has updated classification of goods and services for trademark application purposes, to be compatible with the World Intellectual Property Organization’s (“WIPO”) 11th edition of the Nice Classification. Additional explanations are introduced for some subclass headings, along with introduction of new sub-classes (such as “Electricity Energy” and “Social Network Creating Services”). The changes resolve certain issues which arose from Turkey’s national classification system being incompatible with WIPO practices.

Communiqué Number 2016/02 on Classification of Goods and Services for Trademark Applications before the Turkish Patent and Trademark Office (“Communiqué”), was published in Official Gazette number 29934 on 30 December 2016, entering into effect on 1 January 2017.

Goods and services which are not specifically indicated in the Classification List (attached to Communiqué) will be deemed to be similar goods and services. Similarity will be considered by taking into account their legibility, functionality and purpose.

Please see this link for the full text of the Communiqué (only available in Turkish). Changes are written in bold.

The Appeal Board (“Board”) of the Turkish Patent and Trademark Office (“TPTO”) recently upheld an appeal by the European Commission against a local trademark application involving the EU Emblem. The Board ultimately found the Emblem cannot be registered as a trademark, recognizing the European Commission’s genuine ownership right. Notably, the Board did not limit its examination to registerability in terms of Article 7(1)(g). Rather, it also considered bad faith and the likelihood of confusion. The Board also referred to the Emblem’s commercial value.

In principle, using the European emblem or any of its elements is permitted, so long as such use is within rules set by the Council of Europe. Therefore, third parties can use a circle of twelve gold stars against a blue background, representing the union of the people of Europe, without obtaining any specific written consent.

Third parties can use a circle of twelve gold stars against a blue background without obtaining any specific written consent, provided, the emblem or its elements do not:

– Create the incorrect impression or assumption that there is a connection between the user and any of the institutions, bodies, offices, agencies and organs of the European Union or the Council of Europe.

– Lead the public to believe erroneously that the user benefits from the support, sponsorship, approval or consent of any of the institutions, bodies, offices, agencies and organs of the European Union or the Council of Europe.

– Get used in connection with any objective or activity which is incompatible with the aims and principles of the European Union or of the Council of Europe, or which would be otherwise unlawful.

However, the Council of Europe’s rules prohbit third parties from registering the Emblem as a trademark.

According to the ex officio refusal grounds under Turkish law, applications concerning state emblems, official hallmarks and emblems of intergovernmental organizations cannot be registered in Turkey, in accordance of Article 6ter of the Paris Convention (Article 7(1)(g) of Turkish Trademark Decree Law; Article 5(1)(g) of Industrial Property Law numbered 6769).

In the case at hand, the European Commission filed an opposition against a trademark application filed with the TPTO, referring to its registered community trademarks.

In its first examination, the TPTO rejected the European Commission’s opposition, stating that there was no likelihood of confusion between the trademarks, so Article 7(1)(g) would not be applied. The European Commission appealed the TPTO’s refusal.

In December 2016, the Board rejected the trademark application, recognizing the European Commission’s genuine right ownership over the Emblem. The Board noted the applicant’s conscious choice and obvious intention to take advantage of the Emblem’s reputation also referring to the likelihood of confusion. The decision also cites the European Commission’s community trademark registrations.

However, in this case, the Board did not limit its examination to registerability in terms of Article 7(1)(g). Rather, it also extended its evaluation to consider the bad faith and the likelihood of confusion. The dispute emphasized that as well as being a sign protected by specific rules, the EU Emblem also enjoys trademark protection.

Turkey’s Constitutional Court recently ruled that a sub-employer’s employees cannot benefit from rights which arise from the primary employer’s collective labour agreements. The court held that the legal situation of the primary employer’s employees is different to the sub-employer’s employees. It stated that while the primary employer is jointly liable for labour claims, the sub-employer’s employees cannot benefit from any collective labour agreement which the primary employer is a party to. The Constitutional Court held that this does not breach the constitutional equality principle.

In the case at hand, a lower court requested the Constitutional Court consider Article 2(7) and Article 2(9)(b) of the Labour Code, claiming these provisions are against the right to labour and the principle of freedom of contract. In general terms, the relevant parts of these provisions state that a primary employer is conjointly responsible to a sub-employer’s employees for claims arising from collective agreements signed by sub-employers and employees of public entity’s sub-employers cannot benefit from collective agreements.

The Constitutional Court stated:

– As per Article 2(7) of the Labour Code, primary employers are jointly liable with sub-employers in relation to a sub-employer’s employees in terms of obligations which arise from the Labour Code, labour contract, or any collective labour agreement which the sub-employer is party to. The rule protects employees by assigning liability to the primary employer if a sub-employer (which generally have small budgets) becomes unable to pay a labour claim.

– However, a sub-employer’s employees cannot benefit from a collective labour agreement signed by the primary employer based on this regulation. Similarly, a sub-employer’s employees cannot benefit from collective labour agreements signed for public employees (Article 2(9)(b)).

– A sub-employer’s employees are deemed to work in a separate workplace and there is no labour agreement signed between the primary employer and sub-employer’s employees. Therefore, there is no labour relationship between them.

– If the sub-employer has signed a collective labour agreement, its employees can benefit from these terms.

– The primary employer only becomes jointly responsible with the sub-employer for collective labour agreements which the sub-employer is a party to.

– To benefit from collective labour agreement, employees do not necessarily need to be a member of a labour union which is party to a collective labour agreement. Rather, employees can benefit from the agreement by paying a solidarity fee or by receiving approval from the labour union.

– The legal situation of a sub-employer’s employees and the primary employer’s employees are not the same. Likewise, public employees and sub-employer’s employees working in public enterprises do not have the same legal status. Therefore, issuing different regulations for people who have different legal status is not against the principle of equality.

Please see this link for the full text of Constitutional Court decision numbered E. 2016/2, K. 2016/198, dated 28 December 2016 (only available in Turkish).